It clears the way for Sam Zell, the investor who bailed out the 87-store chain and emerged with 75 percent of its common stock, to install his own top managers as Carter Hawley tries to reverse its steady downward spiral in recent years.

Hawley said he was proud that after the relatively brief 20-month reorganization he had retired enough debt and found enough new capital to begin a makeover of Carter Hawley’s aging stores.

However, he said in an interview, it will take a management with a five- to 10-year plan to meet those goals, and he is 67 1/2 . Hawley said he called Zell, a friend for 20 years, on Oct. 1 and told him he thought it best to step down from management, though he will remain on the board.

He said Zell agreed that a long-term team must be installed. A search committee will be formed to find a successor.

Although President H. Michael Hecht, a 17-year veteran, is considered to be in the running, one retail expert said Hecht may be unacceptable because he was part of the team that presided over Carter Hawley’s collapse.

″This a company that needs major surgery, not tinkering,″ said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail financing consulting firm in New York.

Hawley said that whoever replaces him, no major housecleaning is in sight.

Hawley joined the company as a buyer for its Broadway stores in 1958. He had been literally synonymous with it since 1974, when Broadway-Hale Stores Inc. changed its name to include his. He became chief executive of the parent in 1977 and added the chairman’s title in 1983.

Hawley fought off takeover attempts by Limited Inc. in the 1980s by piling on $1.3 billion in debt and selling the company’s profitable specialty stores, including glittering Neiman Marcus and Bergdorf Goodman.

The debt and a host of other troubles took their toll, nullifying advantages such as widely recognized store names and prime California locations.

The company was squeezed by huge interest payments, an aging customer base and a recession-driven downturn in consumer spending - all at a time when the expensive remake of aging stores became ever more pressing.

Above all, critics like Davidowitz said the company’s Broadway, Broadway Southwest, Emporium and Weinstocks stores lacked focus, giving shoppers little excitement compared with competitors like May Department Stores Co. on the low end and R.H. Macy & Co.’s Macy’s and Bullock’s on the high end.

Carter Hawley hasn’t turned a profit since entering bankruptcy, though its losses have been trimmed as it cut away layers of management, consolidating operations in Los Angeles.

Zell took $600 million in debt off its books by paying unsecured creditors 47 cents on the dollar, which will cut interest costs by $43 million a year. He also infused $50 million into the company Thursday.

With the holidays approaching, it’s too early to start the renovations now, but the company expects to make over 12 to 15 stores next year, Zell said.